- Dell ups outlook as net profit soars. Shares in Dell (DELL) jumped 6.2% in post-market trading after the PC maker reported that FQ1 net profit nearly tripled to $945M and beat expectations. Dell also increased its fiscal 2012 growth outlook for operating income to 12%-18% from 6%-12%. This contrasted with HP (HPQ), which slashed its forecast and saw shares fall 7.3% in regular trading. With Dell's revenue rising just 1% to $15B, lower costs and an emphasis on corporate customers helped offset a slump in consumer demand. That led to a 7.5% fall in PC sales, although this was less than HP's 23% decline. Both companies were hit by what one analyst called the ‘buzz saw’ success of Apple's (AAPL) iPad cutting into PC sales. (Earnings call transcript)
- Staples falls as Q1 profit misses forecasts. Staples (SPLS) shares are -4% premarket after the office supplies company reported that Q1 2011 net profit rose 5% to $198.2M but came in below forecasts. Q1 revenue edged up 1.9% to $6.17B, missing predictions as well. In a further blow, Staples cut its 2011 EPS guidance to $1.35-$1.45 from a prior forecast of $1.50-$1.60, with analysts expecting $1.53. Chairman and CEO Ron Sargent said Staples is making good progress on its growth initiatives but "at a cost to our bottom line" as the company invests in order to gain market share in North America.
- LinkedIn pricing seen at top of revised range. LinkedIn is set to price its IPO after the close of trading today, with a source saying the social network will probably sell its shares at the top end of its modified range of $42-$45 a share. This is 30% higher than an initial pricing of $32-$35 and gives the social network a value of over $4B, or 17 times its 2010 revenue of $243.1M. Such a ratio makes it more expensive than other tech plays, including Google (GOOG), whose stock trades at about six times sales. For some investors, therefore, LinkedIn's valuation is too high. "I wouldn't touch the stock, I wouldn't own it, not at $45, not at $43," said a managing member at hedge fund Ironfire Capital.
- Pressure builds on Strauss-Kahn to quit. Europe is attempting to maintain its hold of the leadership of the IMF as pressure mounts on Dominique Strauss-Kahn to resign following his arrest on sex-assault charges. Tim Geithner called on the IMF to name an interim leader as Strauss-Kahn is “obviously not in a position” to manage the fund, which last year approved a record $91.7B in emergency loans and provides a third of bailout packages in Europe. While a European has always led the IMF, South African and South Korean officials have called for a candidate from emerging nations.
- Rosneft: Talks with BP can resume. Rosneft says its negotiations with BP (BP) about co-operating could continue despite the passing of a deadline for a $16B share swap and Arctic exploration deal between the two companies. "Rosneft has received proposals from BP which go beyond the previous agreements and do not require the extension of the deadline," the company said. The proposed Arctic collaboration stalled because of the opposition of AAR, BP's partner in its TNK-BP Russian joint venture.
- Oaktree Capital plans IPO. Oaktree Capital Management intends to list on the NYSE in an IPO that would value the asset manager at between $8B-$9B, sources said. Oaktree would become the latest private-investment firm to go public and it would follow in the footsteps of peer Apollo Global Management (APO) by transferring its shares from a private exchange run by Goldman Sachs (GS). This would give Oaktree a more active market and its founders a means to cash out their stakes. Apollo listed in March and raised about $400M.
- Fed wants annual stress tests on banks. The Federal Reserve is seeking to impose annual capital tests on banks and to reserve the right to veto dividend payments if they fail. The Fed wants to prevent a situation where over-generous payouts leave institutions under-capitalized, as happened during the financial crisis, although annual reviews could lead to disappointment for investors looking for high dividend payments and aggressive buybacks. The Fed has started discussing its proposal with bank executives, with the Fed's board due to approve a draft of the new rule and publish it for public comment within weeks.
- BP and Conoco scrap $35B Alaska gas pipeline. BP (BP) and ConocoPhillips (COP) have abandoned plans to build a $35B natural gas pipeline from Alaska to the main part of the U.S., saying they failed to win commitments from producers to buy access to the pipeline. A rival proposal backed by Exxon Mobil (XOM) and TransCanada (TRP) remains in the works, although increased production from new fields in Texas and other states has led to a surge in gas production. This has pushed down prices and called into question the viability of the Alaska pipeline.
- Deficit-reduction talks founder. Hopes that bipartisan talks between six senators could produce a deficit-reduction deal that would receive widespread support have hit a roadblock after Republican Tom Coburn dropped out. "We can't bridge the gap between what actually needs to happen and what people will allow to happen," Coburn said, with a source disclosing that the Senator's push for deep and immediate cuts to Medicare were rejected. Another GOP member of the group, Saxby Chambliss, dismissed the idea of continuing to work without Coburn. Separately, Tim Geithner wants a vote to raise the $14.3T debt ceiling 'done and clean' by July, well before a possible U.S. default on Aug. 2. He said the GOP leadership has made it clear "they will not take too long."
- Senate blocks bill repealing oil tax breaks. The Senate has blocked a proposal that would repeal about $2B a year in tax breaks for the five biggest oil companies. Republicans and some Democrats opposed the tax increase, saying it would hurt domestic drilling while failing to reduce gasoline prices. The measure would have affected Shell (RDS.A), Exxon Mobil (XOM), ConocoPhillips (COP), BP (BP) and Chevron (CVX). A GOP bill designed to increase offshore drilling is set for a Senate vote today, though it is not expected to pass either.
- Libya's oil chief defects. Shokri Ghanem, Libya's top oil official, has apparently abandoned Muammar Gaddafi's regime in what would be a big blow to the government's efforts to quell the three-month-old rebellion and to revive an oil industry stricken by the crisis. Ghanem represented Libya at OPEC and was seen as one of the country’s more reform-minded senior officials. If true, his defection would add to those of a handful of high-ranking ministers, including the foreign, interior and justice ministers.
Earnings: Wednesday Before Open
- Chico's FAS (CHS): Q1 EPS of $0.26 beats by $0.01. Revenue of $537.2M (+11.5% Y/Y) misses by $7.2M. (PR)
- Deere (DE): FQ2 EPS of $2.12 beats by $0.06. Revenue of $8.33B (+27% Y/Y) beats by $0.19B. (PR)
- Staples (SPLS): Q1 EPS of $0.28 misses by $0.04. Revenue of $6.17B (+2% Y/Y) misses by $0.02B. Sees FY'11 EPS of $1.35-1.45. (PR)
Earnings: Tuesday After Close
- Analog Devices (ADI): FQ2 EPS of $0.75 beats by $0.07. Revenue of $791M (+9% Y/Y) beats by $45M. Shares +4.5% AH. (PR, earnings call transcript)
- Dell (DELL): Q1 EPS of $0.55 beats by $0.11. Revenue of $15.01B (+1% Y/Y) misses by $0.4B. (PR, earnings call transcript)
- In Asia, Japan +1.0% to 9662. Hong Kong +0.5% to 23011. China +0.7% to 2873. India -0.3% to 18086.
- In Europe, at midday, London +0.9%. Paris +0.6%. Frankfurt +0.8%.
- Futures at 7:00: Dow +0.2%. S&P +0.2%. Nasdaq +0.2%. Crude +1.45% to $98.32. Gold +0.95% to $1494.00.
Wednesday's Economic Calendar
- 7:00 MBA Mortgage Applications
10:30 EIA Petroleum Inventories
2:00 PM FOMC minutes
7:15 PM Fed's Bullard: 'Measuring Inflation'
- Notable earnings before Wednesday's open: ANF, BJ, CHS, DE, SPLS, TGT
- Notable earnings after Wednesday's close: AAP, LTD
The SA Currents team contributed to this post.
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